During the first World Science Conference Israel 2015, which took place in Israel from August 15 to August 21, and which I had the honor of attending and covering for HuffPost Greece, I was spoke with one of the world's leading figures in economics, Professor Robert Aumann.
Professor Aumann was born in Germany in 1930, and lived quite an interesting life. His encounter with John Nash greatly helped to shift his academic focus to game theory. In 2005, he was awarded the Nobel Prize in Economic Sciences.
Before the interview, I also had the pleasure of attending the press conference which Professor Aumann held for colleagues around the world (for example, in Nepal, Ethiopia, Vietnam, the Czech Republic, Lithuania, etc.) He gave many examples for contexts in which game theory can be applied, including the Arab Spring and the Second World War. He also spoke of "The Romans, champions of peace," who were "detestable," but "deserving of respect" because they managed to maintain the peace for so long -- as are the runners-up, the Swiss -- ("I detest the Romans, they burned our temples, sent us into exile, killed hundreds of thousands of us, but they are world champions when it comes to peace; 232 years of peace is not insignificant, you have to respect them for that." The most surprising question came from the reporter from The Himalayan, Rupak Sharma. He asked about the future of the Greek economy, and the ambiguous response from the professor was: "I don't know, I don't like "bailouts," they give the wrong incentive to the economy." This, and many other questions focused on Greece, paved the way for a "Greek-centric" conversation.
I always wanted to ask a Nobel laureate in science: looking back, how hard is it to win such an award?
How difficult? I don't know. I never tried it. (A smile appeared on his face.)
You specialize in, and were rewarded for, your work with game theory. Can you explain some of its basic points to us?
Game theory is the scientific study of building a strategy in situations where many entities are involved, and where they all interact with each other and try to achieve different goals. The simple example of such a situation is a game. For example, a game of poker or soccer in which different entities are involved, interacting with each other, trying to achieve different, opposing goals. In most cases, with games, things aren't exactly like this, because the goals of all the players are not exactly opposing. For example, in poker, you can have four or five players, and the goals of a pair of players would not be in opposition, because they are both seeking to win more money. But if I win more money, that doesn't mean that you won't win more money as well. Poker is overall a zero-sum game, but between a pair of players, it isn't. Soccer isn't necessarily such a game, since the objectives are not exactly opposing; many factors play a role, such as the number of goals you score, your ranking in the league. It's not strictly a "win-lose" situation. The important games, however, are not games like chess, poker, or soccer.
The important games are in the fields of business, law, economics, biology, international relations, domestic policy, national policy, and so forth. These are the most important situations. The goals in these games are almost never completely opposing, but the participating parties interact with each other, and each one of them flights for a different goal.
I bet you would expect this question from a reporter from Greece: Our former Finance Minister, Yanis Varoufakis is a fan of game theory. Have you heard of him?
No, I don't know him personally.
I don't mean personally. I mean, do you know anything about him or his work?
I have heard that one of the ministers in Greece is an expert in game theory -- or rather, he is no longer the minister, as far as I know, he resigned -- but I have never come across his work.
So may I assume you haven't followed the Greek economic situation closely?
I try to keep up, but not very consistently. Let me repeat that on this point, I am a theorist and my basic interest is in theory. Lately, I've also developed an interest in applications, but I don't follow things as closely as a "serious" economist would.
With regards to the economic situation in Greece, you stated a little while ago, during the press conference, that you have asked many famous economists: "Why does Greece have to leave the euro?" How did they respond?
Why does Greece have to leave the euro? I didn't understand their answers. The most logical answer I got was that there is an unspoken agreement among Eurozone countries that they would help each other out with their economic problems, but that it isn't part of the official agreement in the Eurozone. So such an unspoken agreement... I don't know whether or not it has been fulfilled in the present case. This was the only answer I got that I thought was relatively logical. In general, though, I didn't get logical answers at all. And I don't understand why people continue to talk about an exit from the Eurozone. Why would you leave the Eurozone? Why? You are in debt, so you say "we will not pay our debts, the debt is in euros, so find a way to help us." That's all.
And if we were to go bankrupt?
So what? California is bankrupt, the state of California is bankrupt! In other words, they didn't pay their debts. Nothing happened, the state of California still exists. And indeed, they're doing relatively well.
Shouldn't there then be a transition to another currency?
Why? Let's suppose there was no paper currency, as we have today, and let's go back 150 years, when people traded gold and silver. The paper currency that was issued represented a real obligation of the bank to pay you a specific amount of a specific weight in silver or in gold. This is the role that paper currency played. The euro is like gold. I owe you so many euros, I don't intend to pay -- so do something to help me. I am not going to pay you, but why would I leave the Eurozone? Tell me why I would abandon the Eurozone. I don't understand the connection. I, Bob Aumann, don't understand the correlation. And it's not like I haven't tried to understand the link between a default and an exit from the Eurozone. Why do you have to leave the Eurozone? I won't pay you, but my currency will continue to be the euro. And I have asked prominent economists, Nobel prizewinners, big shot bankers. And when I ask them, and I don't get satisfactory answers.
From your perspective, how would you describe the state of the Greek economy?
You know, my wife just came back from Greece. As I was mountain climbing in the Dolomites, she was swimming somewhere in Greece. It wasn't far from Athens, but I can't remember the place. [He grabs his cell phone and tries to call his wife so that she can remind him of the name of the spot near Athens, but she doesn't pick up.] I'll call my daughter, she'll probably know where it was. [He tries to call his daughter, but he couldn't get decent signal.]
Really, there's no problem.
No, no. I have another friend who might know... (and he makes a third call). I can't get anyone to pick-up, I'm sorry. It's not far from Athens though. And it's not an island...
Have you visited Greece?
I went there once, just once, for an Econometric Society meeting.
Now let me get back to my previous question, with regards to the difficult living conditions in Greece... What is the first thought that comes to your mind?
I think that the Greek citizens must receive incentives. Incidentally, my wife had a wonderful time in Greece. I asked her if she saw signs of the crisis there, but she replied: "No, no sign at all." She didn't have any problem using her credit card, and yes, she took a lot of cash with her to prepare for any potential problem, but there was no problem. Of course, this is not necessarily representative of the situation. I am definitely not saying that. But let me ask you something: I heard that the German banks lent money to Greece in order to fund some projects. But this money turned out to be unnecessary, superfluous, and it wasn't used for infrastructure, as was the original plan. And there were many complaints about how this money, which Greece borrowed, was used. Do you know what I'm talking about? Have you heard that something like this happened?
I suspect that there might have been such an incident, but I would not like to generalize without having something specific in mind.
I think that appropriate incentives should be given to the Greek citizens, as well as to the government, so that it may concentrate on getting out of this tough situation on its own.
Now let me ask you something: do you believe that there is a lot of corruption in Greece?
There is corruption in Greece, like there is corruption in other countries. It is not unique to Greece. If you ask me, the challenge for any ruling government in Greece is how to implement reforms in a balanced way, by which to bring about economic growth, without simultaneously "suffocating" citizens. Or, for example, to reduce Greece's bureaucracy, or to have a clear investment plan.
There are many obstacles to investing, that's true. So there you are: the government has to tackle the situation in hand, and try to do something about it.
I am a fan of incentives, and this is also the basic principle in game theory. If you don't have the right incentive to do something, you won't do it. If you have another bailout, followed by another default, this is not going to help the situation.
For my next question, I will use a sentence which is attributed to Albert Einstein [one of the founders of Hebrew University, where I met Professor Aumann] which goes like this: 'Insanity is when you repeat the same thing over and over again and expect different results.' So my question: Do you believe that the rescue plan for the Greek economy over the last five years is "insane" -- a repetition of the same methods, with continual cuts in pensions and salaries for example -- or has it simply been flawed?
I would not like to say. You can form your own conclusions. I do however agree with Einstein, that's for sure.
What would you do if you were in the shoes of one of Greece's lenders?
If I were in their position, I would not lend Greece more money. That's my response. And again, I want to stress that I have a very superficial view, I don't have all the details. Just by glancing at the situation from afar, what could happen is the following: the German banks who lent money to the Greeks are now subject to a bailout by the German government, and the German government is the German people. Therefore it is the German taxpayers who will rescue the German banks who lent money to the Greeks. So, if I were in the position of the German government, perhaps I would do the same, because logically there would be a great deal of pressure to rescue the German banks. It's a complex system. Speaking more generally, it seems clear to me that if you lend money to someone and they don't give it back to you, then don't lend to them again. Naturally, when your existence is being threatened by this, then that's another story, and in that case, I don't know what I would do.
On the other hand, someone could respond by saying that the Greeks are suffering as well, so that their banks can be rescued, and that the people, the citizens are not just numbers, who pay for the poor decisions of the government that happens to be in power.
Yes, but you have democracy, and the people choose the government, isn't that correct? Basically, the people said "we don't want to pay." When they elected the Tsipras government they said "we don't want to pay." And the referendum that was held said the same thing: "we don't want to pay." You don't want to pay, don't pay. Continue.
What is your opinion of the Greek Prime Minister Tsipras?
I think he may be right. He simply says "I don't want to pay, and won't." Maybe he shouldn't have to pay. Maybe he is afraid of what will happen in Greece, and the future. I don't think I have enough knowledge to say exactly what I would do if I were in his position. I think that if Greece were to default, and say that it won't leave the Eurozone... if they say, we declare bankruptcy, we aren't going to pay our debts, or we won't pay them fully, and we will put together an organized program, perhaps we would get out of this situation entirely. It's not easy. It's not easy. But I don't think everyone is suffering in Greece. Many people are suffering, but also many people are not suffering in Greece.
On the other hand, what is the state of the Israeli economy?
I came here in 1956, when we still had ration cards. There was no money at all, and everything was very expensive. And our standard of living was much, much lower than it is today. Israel grew significantly. And now we are very strong economically. I am not a fan of socialism. I don't believe in equality. I don't believe that people have to be equal.
What do you mean by this?
I think that if each person has enough food, a decent place to live, and decent clothes, maybe not a lot, but enough to wash one piece of clothing and wear another, while someone else is in a much better state, I don't think this is such a tragic situation, as modern economics say, and as my friend, leading economist, Joe Stiglitz says when he speaks about equality. When I ask him "Joe, do you believe that equality is necessary for the success of the economy, or do you simply believe in the principle that people should be equal?" And he replies: "Both."
But I think that as far as I am concerned, it's not a matter of principle. I don't believe people have to be equal. If you take a risk, and make money, and become rich, that's OK. I think the road toward equality stifles the economy. If people feel they won't be able to enjoy the fruits of their labors, then they won't work, and they won't invest. It's that simple. I disagree with Joe on this matter.
Wait, let me show you something one of my students gave me. [He walks to his desk, returning shortly after.]
It's in Hebrew. It says: "The fact that I am a pig doesn't bother me, what I want is to have enough, and to live a good life. If someone has a thousand times more than I do, I don't have any problem."
In closing, what advice would you give to a young scientist, who is just starting out on his career in science?
Not just to a young scientist, to a young person generally. "Do what you like. Do what you like to do. If you like what you do, you'll get good at it. And you'll get good at what you like to do. Ok? Do what you like, be happy, and the world will be better."
Thank you for your time.
This post first appeared on HuffPost Greece and was translated into English. It has been edited and condensed.
Photos by Yael Gamon.